In the face of unprecedented and rapidly accelerating change, business owners are facing an immediate need to develop the next generation of leaders. Succession planning is no longer an isolated event occurring at or near the end of a business owner’s or leader’s career. The ever-increasing depth, breadth and pace of change means leaders must continuously be creating leaders up and down the organization.
The real challenge is to help employees – who may be very skilled in some of the tactical aspects of the business – understand how all the elements of the business fit together. And that is not enough; the elements that make the business successful today must be constantly scrutinized for their ability to succeed in the future.
If current and future leaders wish to avoid becoming victims of the past, they must hypothesize as best as they can about what will come.
Accounting for Generational Differences
In most cases, the style, experience, and background of the next generation will be different. For example, if the current owners are content to work 60 hours a week, and the next generation thinks they can get the job done in 40 hours, an evolution in how the business is run will be necessary.
A sudden lurch caused by style differences can cause a business to lose key employees, customers, and suppliers. The reality is that a business’s values, practices, processes, and style must evolve.
To accommodate this, a series of stages to test, practice, and codify changes is required. It has been our observation that while the external actions may need to be different to address style and environmental differences, the most successful transitions occur when the values of the succeeding generation match those of their predecessors.
Today’s leaders must decide who they need to be, and who their team needs to be, in order to create the experience and outcomes they collectively desire. Succession can no longer simply be an event in a business owner’s lifetime. It is critical to see it as a continuous strategy for building strengths and capabilities that will enrich the current and future generations of leaders.
Moving Hearts, Minds, and People
We have a customer that owns several different family businesses. The primary owner (“Dad” to both family and non-family employees) has a leadership team of nine members including:
· Two sons who have each been in the business for at least 10 years each. One is strategically capable. The other is a great employee who will eventually own part of the business, but never drive the business as a leader.
· The “old guard”: four non-family employees over 50 years old who will eventually retire or be retired.
· Three non-family employees under the age of 45, who are a critical part the future of the business. One is a candidate to own stock.
The owner built the business from scratch over 25 years ago and runs it like a benevolent dictatorship. This means that while the leadership team is outstanding in terms of making day-to-day and weekly tactical decisions, they have limited experience in making longer term strategic decisions.
They also have very little experience in dealing with some of the larger, more profitable customers, and handling complicated employee and cultural policies.
In talking with the leadership team, it was apparent they unanimously felt the business only had to continue doing what it had always done in order to succeed. While tighter margins, increased electronic relationships (less face-to-face contact), and higher employee demands were expected in the future, they all felt the “recipe” Dad was using would suffice.
In talking to Dad, he vehemently disagreed with his team’s views and felt they needed to think about how to make necessary strategic changes and strengthen critical capabilities.
Identifying the Primary Issues
After completing an assessment, the leadership team identified these key actions:
- Make the transition from a benevolent dictatorship to a great leadership team.
- Teach and sustain ownership thinking, but broaden it across the organization, even outside of the leadership team.
- Knit family and non-family, owners and non-owners together.
- Identify the right members of the team.
- Identify what needs to be changed.
- Replace Dad’s capabilities.
- Deepen, strengthen, and broaden existing capabilities.
Give the Team Time
This example speaks to the urgent need to identify your unique business model and transfer it to the next generation. Putting it down in writing, and constantly testing and clarifying it will ensure its survival into the next generation when the founder or previous generation is no longer available.
It took this team about 18 months to get everything in place to ensure success — and put Dad in a position to retire early.
The current owner must begin to let go to gain greater security in the future. They cannot build what needs to be built, they can only provide the tools, raw materials, and leadership.
Getting it right means the next generation will work in a true partnership to acquire the materials, structure, capabilities, and tools to build what the future demands.
Success Planning mistakes to avoid:
- Continuing oral tradition as the primary method of wisdom transference.
- Not setting dates for each stage of a transition.
- Being unclear on who can and wants to be part of the next generation.
- Just setting a transition date and not establishing the requirements that must be met.
- Making the transition itself the goal rather than a one of many steps towards achieving a clear and shared vision for the company and team for the three to five years beyond the transition.
- Focusing on paperwork and not on people and operational issues.
- Emphasizing management and not leadership.
- Assuming everyone wants to and can own and/or lead the business.
- Believing the owners know what they want and can just walk away.
Bruce Gresham of Applied Vision Works can be contacted at email@example.com.
This article originally appeared in the July/August, 2022 issue of Mailing Systems Technology.